DT Debates: Is it time to cut out cash and cards and go all in on digital dollars?

As with all things, our wallets have been slowly getting an electronic makeover. Debit and credit cards have largely replaced the need to constantly carry cash, and checkbooks have been almost entirely relegated to paying rent and other bills. The next step in this evolution is e-currency, using technologies like NFC and apps like Google Wallet to manage and access our bank accounts. But does this mean we should entirely eschew cards, cash, and checks in their tangible form? Our own Amir Iliaifar and Nick Mokey battle it out over the future of our money. In this week’s DT Debate, we ask:

Amir

I think it’s fair to say that I’m not some closet Luddite waving my cane at every whipper-snapper who walks past me with an Android iPhone (or whatever those new-fangled contraptions are called). In fact I’m all for utilizing new technology to make our lives more convenient and efficient — I write for online tech site for crying out loud. But at the risk of sounding like some crotchety old fogey, I think moving away from an analogue, cash-based system to an entirely digital wallet slowly or otherwise, is a bad, bad idea.

Why am I against it? Well I’ll tell you why. Moving away from a cash-based system might seem convenient but I don’t believe it is. Using cash has many benefits to both merchants and consumers including, but not limited to, bypassing hefty transaction fees, or gaining them in the case of ATM operators.

But perhaps even more important is the issue surrounding privacy and digital transactions. I’m not one for buying into conspiracy theories, and I don’t live in fear of big government monitoring my every move, but I don’t like the idea of virtually all my transactions being monitored by the government or on record for the banks. While we may very well be firmly entrenched in the “Facebook era” I don’t believe everyone wants their business (especially financial business) sprawled out for everyone to see, myself included.

I think the real question here isn’t whether or not we should move away from tangible currency, but rather do we even need to? I mean, isn’t that what debit cards are for anyways?

Nick

Great points about privacy and fees. Allow me to DEMOLISH them.

Sending money digitally typically incurs a transaction fee right now, but in the long run, digital transactions should cost us less than cash. After all, which do you think is really cheaper: circulating thousands of tons of paper and cold hard metal around the country, or moving digits around on a computer?

Yes, using cash costs you money. Believe it or not, minting billions of coins every year with expensive metals (a penny costs 1.7 cents to make) and outwitting counterfeiters with incredibly sophisticated paper money isn’t free. The U.S. Mint will spend $2.1 billion pumping out hard currency this year. That’s just the cost to taxpayers, not to even mention the costs merchants will bear from handling and transporting currency – or even the cost to you from coins that will be forever lost to couch cushions or down the drain. Cash transactions appear “free,” but only because we like to close our eyes to the real expenses.

As for privacy, a digital system doesn’t necessarily have to mean everyone knows every record of what you spend money on. Look at BitCoin, the peer-to-peer currency that exists outside any governmental regulation: It’s actually so private, people have been using it to buy illegal narcotics and other contraband through the Internet. So there you go Amir, there’s still a way for you to get your crack without a wad of 20s. And even for legal digital transactions, the government wouldn’t be able to flip through your records on a whim – they would need a warrant, just like they do now for credit card records.

Amir

To be frank, I could care less what it costs the government to mint coins, and I’ll gladly “close my eyes to the real expenses” (out of sight out of mind after all). But what I won’t close my eyes to are the very real problems moving toward a digital currency could entail.

You say that outwitting counterfeiters is an expensive endeavor, and maybe you’re right, but physical currency will ALWAYS be much more difficult to counterfeit than digital money. If you don’t believe me then just look at any of the stories we have covered where groups like Anonymous hack into government Websites and do as they please. Do you really think that won’t be a danger if we are all using digital funds?

As for my illicit drug addiction, well… I’d prefer you keep that out of all this, but joking aside privacy is a huge concern and I don’t think it’s fair to just dismiss it like you have. But you know what? You’re right. The government has a legal protocol they must go through in order to view records, documents, and transactions so I can’t imagine it would ever infringe on the rights of citizens in such a manner, let alone seek justification for doing so. <Sarcasm off>.

Nick

Well, if you don’t even want to talk about the expenses of maintaining all those coins and bills, I’ll take that as a concession that digital currency would be cheaper. Which it would, good call.

I would definitely argue with the premise that physical currency is harder to “counterfeit” than digital. Any joker with a couple hundred dollars worth of printing equipment and some time on his hands could print up a $20 that would pass at the local 7-11. Have you seen someoftheidiots they reel in on counterfeit charges? Try faking PayPal into adding $20 to your account. Or tricking your bank with a fake ACH transfer. Good luck. Even the master haxors at Anonymous (I can use sarcasm too) haven’t been able to pull those off.

I’m sure that theft (like stolen credit card numbers) will continue to be an issue with digital currency just as it is with cash, but that’s a societal issue I don’t expect we’ll ever banish. An all-digital system should make it far easier to track back the culprits when it does occur.

To revisit privacy, I share your skepticism that the government would actually play by its own rules and not infringe on the rights of citizens, but it seems like a discussion for our next Tea Party meeting rather than a debate over digital currency, no? Just don’t tell them I want digital currency instead of a return to the gold standard, I’m pretty sure Ron Paul is not cool with that.

But seriously: BitCoin. Proof that digital does not mean “trackable.” I’m going to buy you some crack RIGHT NOW just to prove it.

Amir

It’s not that I don’t want to talk about the expenses maintaining physical currency involves (obviously there is an expense) but your proclamation that a world operated solely with digital currency would be this wonderland bereft of fees is wrong. The idea that digital currency will be cheaper is inaccurate. Especially when taking into account how much it will cost to operate and maintain the infrastructure associated with such a system.

And speaking of that infrastructure: what happens when it goes down? What happens when you need to access your digital wallet but you can’t because the servers are down for maintenance or there is a power outage in your area? I don’t know about you, but I’d be pretty disappointed if I drove around all day long looking to complete my Hanna Montana boxed Blu-Ray set only to walk up to the counter and be told I couldn’t because there was a problem accessing my digital wallet. Sweet niblets, that would suck!

While I will admit that the justification for a move to digital currency is noble enough (combat corruption, stop tax evaders, and make things generally more streamlined) the reality is less encouraging. Banks, companies, and the government could potentially profit the most from such a system. And while some might see this as progress I simply don’t share that sentiment.

In the immortal words of Wu- Tang Clan’s Method Man: “Get the money, dolla, dolla, bill y’all.” And that’s the way I’d like it to stay.

Nick

While it’s hard to argue with the words of Wu-Tang Clan, I’ll do my best.

I don’t think digital currency would be free, only that those costs would be reasonable. Just look at the existing forms of digital money we have today. PayPal charges modest fees, Amazon WebPay charges no fees, and almost all banks offer some form of free checking account with free ACH (electronic) transfers. Credit cards are probably the guiltiest of gouging, but for consumers, even those are free to use, and reasonable enough for merchants that they still make sense to us.

What happens if it goes down? The same thing that happens when MasterCard’s servers crash or PayPal locks you out of your account by accident: You just use another form of payment. No matter how a system of digital currency were concocted, there would still be different forms of them, so none of them should “go down” all at once. If electricity goes out or Internet access is interrupted, then yeah, you’re screwed. But I dare say most businesses are screwed without Internet access and electricity anyway, so not much of a leap. As all good survivalists know, gasoline and 22-caliber ammunition will be the currency of the apocalypse, anyway, not paper money.

Bottom line: Physical currency is antiquated, and the sooner we make the leap to an all-electronic currency, the better. Digital transactions are faster, more convenient, leave less margin for error, and require less overhead. The only thing I will miss about pennies will be putting them on railroad tracks.